Key Takeaways

Use extended-hours trading sessions to formulate routines and habits, and to evaluate mistakes [Use extended-hours trading sessions to formulate routines and habits, and to evaluate mistakes]

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The markets are closed. Is it time to pull out a good bottle of red wine and kick back in front of the fire? Maybe. But some traders will say that the trading day is just getting started when after-hours trading begins.

After-hours trading prep can be invaluable in helping analyze your past performance, study potential opportunities, and plan the specifics of future trades without the turbo-charged emotions and excitement that the day session can provide.

Unless you’re an intraday scalper, many traders aren’t well-served by ad hoc, unplanned trade entries during active market sessions. You’ve probably heard it before, but it bears repeating: Consider taking the time to plan out your trades with specific entry points, targets, and stop-loss levels before you enter a position. The extended-hours trading sessions, when things tend to be less hectic, are a good time to make these preparations.

“Decide what to trade, when to trade, how much to trade, and when to exit," says Pat Mullaly, education coach, TD Ameritrade. “The middle of the trading day is not the time to research stocks and define entry, position size, and exits. You become rushed, uncertain, and prone to mistakes. Trading confidence could suffer."

Routines and Habits

Establishing and following a set routine after the markets are closed and during the after-hours trading of the New York Stock Exchange (NYSE) session could potentially produce more focus, planned and thoughtful trade entries, and perhaps even an extra dose of self-confidence. Pro athletes often prepare for hours before a big game, and that could be a good example for an active trader to follow ahead of a trading session.

"Professional athletes all have a certain set of skills, yet they all have routines they use to focus themselves on the task," Mullaly says. “Good practice habits and routines are part of the process."

There are several things to consider when developing a routine that works for you. Perhaps one of the most important factors is consistency. If this routine can become habit, you can work through the points quickly and efficiently and help keep your trading on task. Think of it as a mini “performance review" that you give to yourself, perhaps during after-market trading as you prepare for the next day.

Consider These Four Moves

Mullaly suggests four things a trader can incorporate into an after-hours trading routine:

Evaluate your trading performance. Assess where you did well and also where you fell short and why that happened.

Analyze each individual trade you initiated. Did you follow your rules and your trade setup, or did emotions take over and get the best of you? Use a journal; writing things down makes them stick. Other things you can ask yourself include: “What did you think would be the outcome and what was the outcome? Was the trade set up in line with the posture of the market? Was the outcome due to skill or luck?” Mullaly says.

Prepare for the next trading session. “A little honest self-analysis can go a long way to enhance your performance in your next trades," Mullaly says. “Visualize yourself overcoming previous mistakes and develop a winning mindset."

Identify where you see trades setting up in the next trading session. Write out potential trading spots with entries, objectives, and stop-loss points. “Having the discipline to do this can, over time, create a probabilistic, repeatable method," he says. If you plan ahead of time, execution is all that is left."

Then, after the next trading day is over, do it again. Developing a trading routine to study both your performance and plan for potential market entry points can become an easy habit to embrace in the after-market trading hours. “Developing and sticking with this routine removes you from the daily noise, and allows for objectivity and continued improvement," says Mullaly.

To take your trading game to the next level, prepare like a professional. Professional athletes, musicians, and lawyers know that the process of preparation is key. “A trader’s edge lies not only in skill and probabilities, but also in their ability to execute on the plan," Mullaly says. “Having an established routine when the markets are closed allows you to objectively consider prior mistakes and successes, enhancing your trading abilities and skills." And if in all this after-hours preparation, you spot a potential opportunity? There may be a market open for you in those off-hours.

A stop order will not guarantee an execution at or near the activation price. Once activated, they compete with other incoming market orders.

When placing an extended-hours overnight trade, you may only place unconditional limit orders to buy or sell. Additionally, you may only take the long side of the trade (no short selling). There may be greater liquidity risk for orders placed during this time period as outlined in the Extended-Hours Trading Session Rules.

Extended-Hours Trading is subject to unique risks and rules that are different from the normal trading session. Please review the Extended-Hours Trading rules before you decide to participate.

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

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